New farm bill provides stronger bargaining chips

May 24, 2002

If the U.S. cotton industry needed another reason for a new farm bill, it only had to look at the statements by Brazilian officials a few days after President Bush signed the new law.

The officials said Brazil would challenge the legislation's cotton subsidies, charging they violate the agricultural accord of the World Trade Organization (WTO). Brazil has filed complaints against the United States on soybeans, sugar, orange juice and steel.

“The North American farm policy is damaging to Brazilian cotton producers, and it doesn't take many graphs to prove this,” said Pedro de Camargo Neto of the Brazilian Agriculture Ministry.

Brazil wasn't the only country complaining. Australia, Canada, the European Union all criticized the new law. Foreign periodicals also weighed in with the London-based The Economist, claiming the new farm bill would lead to a failure of the Doha Round of WTO negotiations and more world economic problems.

U.S. officials downplayed the criticism, calling it an attempt to divert attention from much higher levels of agricultural subsidies in the other countries.

“The new farm bill should not raise questions about our common aims to eliminate export subsidies and substantially improve market access,” U.S. Trade Representative Robert Zoellick said. “The message of the farm bill is that the United States will support our farmers fully while maintaining our WTO obligations.” Zoellick noted that the WTO ceiling on European Union agriculture subsidies is $60 billion — more than three times the U.S. ceiling of $19.1 billion, which the new farm bill will respect.

Speaking in Canada, Agriculture Secretary Ann Veneman said USDA would not be spending much more on farmers than it has through a series of supplemental appropriations bills.

“We often don't recognize how high the tariffs around the world are on food and agricultural products,” she said. “They average in the world about 60 percent. For the U.S. that number is only about 12 percent on average.”

In the case of Brazil, U.S. soybean farmers know too well what can happen when you give the Brazilians an inch. Starting with a handful of acres when President Nixon embargoed soybean exports to Japan in 1970, Brazilian soybean production has risen to an estimated 1.6 billion bushels using low-interest government credit.

Some believe Brazil wants to accomplish the same kind of growth with cotton to make more use of its relatively cheap land (less than $200 per acre in some states). Brazil's increase from 2 million to 5 million bales in the last three years has come at the expense of U.S. cotton producers already struggling from a glut of cotton on the world market.

In the same article in which Camargo was quoted, analysts said Brazil's cotton crop would fall 21 percent to about 5 million bales this spring (the growing season is reversed), ostensibly because of lower world cotton prices.

If it can lead to another reduction in Brazilian cotton acres, the new law will have already paid off.